Koa Cctv Inc v. Soar Art Ltd and Another

DCCJ 2226/2020

[2020] HKDC 1100

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2226 OF 2020

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JUDGMENT

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A.  INTRODUCTION

1.This is yet another case concerning email fraud.  The plaintiff is the victim of the fraud.  The plaintiff’s case is that in or about February and March 2020, as a result of a fraud perpetrated against it, it had transferred the sums of US$184,298.80 and US$24,653.00 to the 1^st defendant account with Dah Sing Bank Limited in Hong Kong (account number: 7770191575) (“D1’s Account”) and the 2^nd defendant’s account with Nanyang Commercial Bank Limited in Hong Kong (account number: 043-488-9-220180-8) respectively.

2.The Writ of Summons was issued on 22 May 2020.  Subsequently it was amended on 28 August 2020.  The 1^st defendant has not filed any Acknowledgement of Service of the Writ of Summons (or the Amended Writ of Summons) or Defence to date.  In fact, the 1^st defendant has not taken part in or responded to the present action all along. 

3.By the summons dated 28 October 2020 (“the Summons”), the plaintiff applied for default judgment against the 1^st defendant.  The Summons is heard before me today.  Mr Chu of the plaintiff’s solicitors appeared on behalf of the plaintiff.  The 1^st defendant is absent.

4.I was informed by Mr Chu that the plaintiff has not served the proceedings on the 2^nd defendant, and the present application is only in relation to the 1^st defendant.

B.  SERVICE

5.According to the Affirmation of Li Kam Kong filed on 9 October 2020, the Amended Writ of Summons was served on the 1^st defendant by leaving the same at the registered office of the 1^st defendant on 7 September 2020. 

6.I was further informed by Mr Chu that the Summons was served on the 1^st defendant on 28 October 2020, by leaving the same at the registered office of the 1^st defendant.  The plaintiff’s solicitors have undertaken to file an affirmation of service confirming the same within 7 days hereof. 

7.I am satisfied that the 1^st defendant ought to have notice of today’s hearing.  In fact, as mentioned above, the 1^st defendant has not taken part in or responded to the present action all along, and I was informed by Mr Chu that the 1^st defendant did not attend the previous hearings in the present action as well.  Accordingly, I proceeded to hear the Summons in the absence of the 1^st defendant.

C.  THE PLAINTIFF’S PLEADED CASE

8.The plaintiff’s pleaded case against the 1^st defendant can be summarized as follows:-

(a)  The plaintiff is a limited company incorporated in the United States.  It carries on business in, inter alia, the wholesale distribution of CCTV products, DVRs, audio and video products and home innovation.

(b)  The 1^st defendant is a limited company incorporated on 7 April 2017 under the laws of Hong Kong.

(c)  The 1^st defendant has maintained D1’s Account with Dah Sing Bank Limited.

(d)  The plaintiff has never had any business, commercial or other dealings with the 1^st defendant.

(e)  The plaintiff had business dealings with a company incorporated in the People’s Republic of China called Hangzhou Hikvision Digital Technology Co. Ltd. (“Hikvision”).  Hikvision’s representative responsible for liaising with the plaintiff was one Ms Katherine Zhu (“Ms Zhu”).  Ms Zhu, on behalf of Hikvision, communicated with the plaintiff via the email account of [email protected] (“Ms Zhu’s Email Account”).

(f)  ;On or about 25 February 2020, the plaintiff needed to transfer a total sum of US$184,298.80 (“the Sum”) to Hikvision to settle outstanding fees owed to Hikvision.

(g)  On or about 25 February 2020, the plaintiff received a series of emails (later found to be fraudulent) purportedly sent by Ms Zhu from Ms Zhu’s Email Account.  In the said emails, the plaintiff was asked to transfer the Sum to D1’s Account.

(h)  Pursuant to the request, the plaintiff transferred the Sum to D1’s Account on 25 February 2020. 

(i)  On or about 12 March 2020, the plaintiff was informed by Mr YangZhong Hu that the email system of Hikvision, specifically Ms Zhu’s Email Account, had been hacked and was compromised.  The above emails were in fact not sent by Hikvision or Ms Zhu, and Hikvision had no knowledge of the emails. 

9.The plaintiff accordingly claims relief in respect of the Sum transferred to D1’s Account pursuant to the fraud.

D. THE DEFAULT JUDGMENT APPLICATION

RELEVANT LEGAL PRINCIPLES

10.It is trite law that in considering whether to grant judgment in default, the court cannot receive any evidence but must give judgment according to the facts and matters pleaded in the pleadings alone.

11.It is also trite law that the principle that a declaration will not be granted when giving judgment without trial is a rule of practice and not of law, and such principle will give way to the paramount duty of the court to do the fullest justice of the plaintiff to which he is entitled.

12.In Guaranty Bank and Trust Company v Zzzik Inc Limited HCA 1139/2016, 18 July 2016, DHCJ Cooney SC stated as follows (at §27):-

“27. Regarding the claim based on unjust enrichment, money paid under a mistake of fact is prima facie recoverable provided that the payer did not intend the payee to have the money in any event, the money was not paid for good consideration and the payee has not in good faith changed his position: Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd & anor [1980] QB 677…”

13.When property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient so that the property is recoverable and traceable in equity:- Wismettac Asian Foods Inc v United Top Properties Ltd [2020] 3 HKLRD 732, at §15 (per DHCJ Paul Lam SC).

14.Even if the recipient was not a party to the fraud, if his state of knowledge is such as to make it unconscionable for him to retain the money, the defrauded claimant has a tracing remedy.  The knowledge does not have to be acquired at the time of receipt, it can be acquired subsequently while the money is in the recipient’s hands:- Guaranty Bank and Trust Company v Zzzik Inc Limited, supra, at §§32-33.

THE PRESENT CASE

15.Based on the facts pleaded in the Amended Statement of Claim as summarized above, I am satisfied that the plaintiff is entitled to judgment against the 1^st defendant.  I am also satisfied that there is a genuine need for the declarations sought to affirm that the plaintiff has a proprietary interest in the Sum in D1’s Account.  Such declaratory relief would enable the plaintiff to pursue proprietary remedies against the 1^st defendant.

16.Accordingly, I am prepared to depart from the rule of practice not to grant declaratory reliefs in default judgment.

17.In the premises, I grant default judgment in terms of draft order attached to the plaintiff’s skeleton submissions dated 18 November 2020, save that paragraph 4 should be revised as follows:-

“The 1^st defendant shall pay to the plaintiff the costs of the action in so far as it relates to the 1^st defendant, including this application, summarily assessed at HK$90,000.”

Mr Joshua Allen Kiu Wah of ONC Lawyers, for the plaintiff

The 1^st defendant was not represented and absent